Risk Points In Various Industries-Hardware Industry

Hardware industry risk points (investor must have industry knowledge)

1.The driving force of the hardware industry

The core driving force of the hardware industry is its innovative ability, which enhances hardware functions while rapidly reducing costs. The second driver is Moore's Law (the number of transistors integrated on the chip will double every two years) and the economic structural changes in developed countries make the demand for hardware grow much faster than the macroeconomy. The third driving force is the symbiotic relationship between software technology and hardware technology.

2. Competitive advantage

Technology itself cannot constitute a competitive advantage. In the hardware industry, there are few technological leaders that can last for a long time. In fact, competitive advantage is rare in the hardware industry, but let's take a look at the four key competitive advantages of the real world: a. High customer conversion costs (loyal customers).

b. Low-cost manufacturers (scale advantage) And sales channels).

c. Intangible assets (patents, brands and talents).

d. Network effects: when a certain type of product becomes more popular, other hardware products need to pay attention to its characteristics, and there will be more and more people use more and more time to learn to operate these products.

4. Summary

Contrary to the software industry, it is extremely difficult for the hardware industry to establish a stable competitive advantage. It is a typical cyclical industry. In the hardware industry, companies based on low-cost, intangible assets, high switching costs, and network effects are far more competitive than technology-based companies. In addition, close attention must be paid to changes in inventory, and hoarding of inventory often has disastrous consequences for hardware companies.